It’s not just clean-energy investments that are at risk. In another cruel bit of irony, PG&E’s bankruptcy filing could also make it more difficult for California utilities to raise the capital needed to harden their infrastructure against wildfire, said Travis Kavulla, a former president of the National Assn. of Regulatory Utility Commissioners who now serves as director of energy policy at the R Street Institute, a center-right think tank.

“Bankruptcies are tough. It means people may lose their pensions or get them cut. It means people who invested in projects in California, based on what they thought was a pretty airtight business model of a regulated utility, are getting stiffed,” Kavulla said. “It could create longer-running harms where California is viewed as a market to avoid investment in.”

]]>PG&E’s bankruptcy could slow California’s fight against climate changehttps://www.rstreet.org/2019/01/17/pges-bankruptcy-could-slow-californias-fight-against-climate-change-2/
Thu, 17 Jan 2019 18:06:22 +0000Media Coveragehttps://www.rstreet.org/?p=14721From the Miami Herald:
It’s not just clean-energy investments that are at risk. In another cruel bit of irony, PG&E’s bankruptcy filing could also make it more difficult for California utilities…]]>From the Miami Herald:

It’s not just clean-energy investments that are at risk. In another cruel bit of irony, PG&E’s bankruptcy filing could also make it more difficult for California utilities to raise the capital needed to harden their infrastructure against wildfire, said Travis Kavulla, a former president of the National Assn. of Regulatory Utility Commissioners who now serves as director of energy policy at the R Street Institute, a center-right think tank.

“Bankruptcies are tough. It means people may lose their pensions or get them cut. It means people who invested in projects in California, based on what they thought was a pretty airtight business model of a regulated utility, are getting stiffed,” Kavulla said. “It could create longer-running harms where California is viewed as a market to avoid investment in.”

]]>PG&E’s bankruptcy could slow California’s fight against climate changehttps://www.rstreet.org/2019/01/15/pges-bankruptcy-could-slow-californias-fight-against-climate-change/
Wed, 16 Jan 2019 00:58:00 +0000Media Coveragehttps://www.rstreet.org/?p=14670From the Los Angeles Times:
It’s not just clean-energy investments that are at risk. In another cruel bit of irony, PG&E’s bankruptcy filing could also make it more difficult for…]]>

It’s not just clean-energy investments that are at risk. In another cruel bit of irony, PG&E’s bankruptcy filing could also make it more difficult for California utilities to raise the capital needed to harden their infrastructure against wildfire, said Travis Kavulla, a former president of the National Assn. of Regulatory Utility Commissioners who now serves as director of energy policy at the R Street Institute, a center-right think tank.

“If you asked a few years ago, I think people would have said it’s a good investment,” said Travis Kavulla, the former president of the National Association of Regulatory Utility Commissioners and now the director of energy policy at the R Street Institute.

However, California is one of only a handful of states that hold utilities responsible for damage stemming from their equipment even in the course of normal operations. This wasn’t too much of an issue until multiple large fires started being traced back to PG&E hardware. This startled investors, who began pressuring lawmakers.

The California state legislature passed a law last year, Senate Bill 901, that allowed PG&E to pass the costs of its liability for the 2017 fires to its customers. PG&E estimated that it would cost an average customer an additional $5 per year for every $1 billion issued in bonds.

However, the law doesn’t cover the fires in 2018, and it’s unclear if state lawmakers want to rescue the utility again. If the company can’t pass the costs to its customers, then it’s PG&E investors who have to pay.

And this reckoning isn’t exclusive to California. Across the United States, the power sector is vulnerable to climate change. Prolonged droughts have threatened the supply of cooling water for power plants. Extreme weather events have wiped out infrastructure, as we saw when Hurricane Maria shrouded Puerto Rico in the largest blackout in US history. Rising temperatures are fueling surging peak electricity demand in places like Texas, pushing power generation capacity to the limit as reserve margins get thinner.

“By far the most important environmental factor affecting [electricity transmission, storage, and distribution] infrastructure needs now and going forward is global climate change,” the US Department of Energy noted in its 2015 Quadrennial Energy Review.

The question now: How does a utility price in the risks of rising temperatures and stay in business? When a utility like PG&E has to bear the costs of record-breaking wildfires, it effectively has to become an insurance company in addition to being a utility since it has to manage and distribute risks of uncommon but devastating events.

“The answer, unfortunately, is that everyone has been caught so flat-footed by this episode that no one has thought seriously about that,” Kavulla said. “Do you socialize the risk, or do you expect private capital to bear it?”

]]>The Electric Power Show (Podcast): EPS Ep. 4: Travis Kavulla on combating bailouts and the ‘pernicious alliance’ between greens and utilitieshttps://www.rstreet.org/2019/01/10/the-electric-power-show-podcast-eps-ep-4-travis-kavulla-on-combating-bailouts-and-the-pernicious-alliance-between-greens-and-utilities/
Thu, 10 Jan 2019 17:23:11 +0000Media Coveragehttps://www.rstreet.org/?p=14556From the Electric Power Show Podcast:
America’s wholesale power markets are built on the premise of competition, but in recent years that foundation has faced threats from all sides.

America’s wholesale power markets are built on the premise of competition, but in recent years that foundation has faced threats from all sides.

States, unhappy with the gas-heavy fuel mix markets have delivered in recent years, are taking action to preserve nuclear plants and boost renewable energy. Large generators are pushing multiple market reforms to keep their uneconomic plants online, and the specter of a Trump administration coal bailout still looms over Washington.

One newcomer to “The Swamp” hopes to stem that tide. Travis Kavulla, the former vice chairman of the Montana Public Utilities Commission, recently moved to D.C. to head the energy policy shop at the R Street Institute, a libertarian think tank.

He spoke to EPS in November about how he hoped to create a cross-partisan movement for competition and clean energy.

“My being here in a right-of-center position really is an attempt to be a clarion call to people on my side to oppose bailouts,” he said, “also a call to the other side to stop making policy through this sometimes pernicious alliance between ratebase-oriented utilities and environmentalists who just want to get a ‘W’ no matter how much it costs.”

“People are fed up with having regulated monopolies’ balance sheets used as playthings by policymakers,” he said. “They don’t understand why they can’t choose their own source of supply, they don’t understand why uneconomic plants are receiving bailouts by politicians when there are least cost options available.”

“We constantly hear from the left that consumers left to their own devices will choose the cleaner and greener energy portfolio,” he added. “I agree with them and I believe that’s true so we shouldn’t be countenancing policies that make that choice less feasible or more expensive.”

Advancing customer choice, he argued, will result in lower cost carbon reductions that can be more palatable to the public.

“It’s been frustrating to me to watch a conversation that should be about targeting the thing that we have in mind — carbon emissions — be redirected on things that may or may not reduce carbon emissions or may reduce them more costly than alternatives,” he said. “We will continue to see mandates passed by state legislatures that are some of the most cost inefficient ways of abating carbon emissions.”

Kavulla also spoke about his vision for wholesale power market reform and the chances for an integrated electricity market in the American West. The episode was recorded onsite at the 2018 annual conference at the National Association of Regulatory Utility Commissioners.